Wheat price run hits its peak

Wheat price run hits its peak


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Inverell grain grower and trader David Stewart, Stewarts Grain Trading Pty Ltd.

Inverell grain grower and trader David Stewart, Stewarts Grain Trading Pty Ltd.

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THE northern market’s wheat price rise since November could be nearing its limit, largely due to the downward trend in global prices.

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THE northern market’s wheat price rise since November could be nearing its limit, largely due to the downward trend in global prices.

“We’re at that position in the market in NSW where the price in South Australia will put a limit on how high the price in NSW can go,” says Malcolm Bartholomaeus of Bartholomaeus Consulting, Clare, SA.

“If this international market keeps falling away and SA keeps falling with it, then NSW prices will have to get caught in that and will reach their limit.”

Inverell grain grower and trader David Stewart, Stewarts Grain Trading Pty Ltd – who has given more consideration to the weather forecast of late than the Chicago Board of Trade (CBOT) – agreed the market appeared to be slowing.

“I think it has steadied up – it’s starting to level out a little bit,” he said.

He said there was barely a premium for APH and APH2 over stock feed and with growers getting about $300/t for ASW and APW it was potentially a good time to sell.

However, when people decided to sell would depend more on when they needed cash?ow, and this willingness to sit on stock could help maintain a solid ?oor in the market, he said.

Mr Stewart (pictured) was also certain more grain would be moved north from the southern States.

“We’ve done a few thousand tonnes ourselves (of oats for feed) and we’re only small operators,” he said.

While options of putting grain on a boat from Western Australia or South Australia were now considered feasible, Mr Bartholomaeus said the most attractive move for northern feedlots seeking grain would be to buy from SA’s mid north.

“The price of wheat in the mid north of SA will probably start to put a floor in the market for North West NSW and Queesnland,” he said.

Mr Bartholomaeus said buyers were already carting feed at $110 a tonne freight from northern Victoria to the Darling Downs at a price of about $220/t (free on truck).

With the ASW Adelaide port price at about $243/t, and the mid north of SA usually trading about $20/t below Adelaide, it was already priced at a similar level to grain coming out of Victoria.

“When they do (bring wheat from SA’s mid north to northern NSW) it will put a limit on how high northern NSW prices can go,” he said.

“I reckon the market is plateauing and there’s just enough ‘stuff’ in the market to stop it falling.”

By “stuff” he specifically pointed to cold snaps in the US.

The drought area of the US was gradually increasing again had led to reduced snow fall.

The snow usually protects the young crops from severe cold snaps, but not this year.

Combined with the dry weather, it was beginning to put a floor in the US market, he said.

This can be seen in the CBOT futures, which have remained steady during the past week after falling through the first half of January.

Prices for the March contract have found support at US560 cents a bushel and have not dropped below these levels after free-falling in early January, however, there has been no news to force the market back up either.

These lower prices have triggered a flurry of activity in terms of sales as buyers take the opportunity to buy.

ProFarmer’s Nathan Cattle said Egypt had made a large purchase of close to 300,000 tonnes of wheat, which Egyptian officials say will be enough to tide them over until May.

Other Middle Eastern, subcontinental and Asian nations were buyers through the tail-end of January.

Other “stuff” in North America had also contributed to that region’s physical market running slowly.

Mr Cattle said the cold conditions caused ethanol plants to be shut down, while there were issues in moving the crop to port due to rail constraints.

A longer term problem is emerging in Canada, where there are reports there are simply not enough grain rail wagons to move the record crop from the prairies to port.

Meanwhile, the falling foreign exchange rate (the Australian dollar is presently at US88 cents) and white hot basis levels created by northern Australia’s drought have helped drive the local price rises of the past fortnight.

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